Alliances and Relationships

Alliances

At a strategic level, managers aim to ‘add value’ by ensuring the organisation has the best level of assets and competencies. Increasingly, strategic thinking recognises that it is neither wise, nor feasible, to attempt to exclusively provide/own this optimal level of assets and competencies. Rather than do everything ourselves, it may be more feasible to enter into partnership arrangements with other organisations. For example, two manufacturers could set up a joint distribution system and both benefit from economies-of-scale.

Relationship Marketing

The concept of relationship marketing takes marketing back to basic principles. It recognises the fundamental importance of sustaining customer relationships to generate customer loyalty and repeat business. Additionally, relationship marketing acknowledges a broader view of marketing, and defines a number of ‘markets’ which must be addressed to optimise customer relationships. Undoubtedly, customer markets should be the primary focus of any organisation. Previously, marketing has tended to focus on finding new customer and winning new business. Modern marketing practice (relationship marketing) now recognises the importance of keeping customers and generate recurring business.

Relationship approaches aim to develop customer alliances, whereby the customer not only sees the organisation as their preferred provider, but actively recommends others to use their products and services. This ‘elevated status’ is more achievable when a broader view of marketing is taken. Such a view recognises the role of ‘markets’, other than the direct customer, in developing customer relationships.

Developing Relationships

There is a strong body of evidence supporting the economic case for relationship marketing. For example, Reichheld and Sasser (1990) illustrate that minor improvements in customer defections can generate significant improvements in profit. As relationships are built on mutual benefit, what benefits does relationship marketing bring to customers? The approach typically benefits customers as it:

• requires marketers to have a much closer understanding of customer needs and therefore provide more appropriate solutions to customer problems,
• may result in schemes rewarding customer loyalty, and
• fuses all aspects of the business together, making the entire entity more customer focused and responsive to customer need.